State Bank of India’s chairman Rajnish Kumar in an exclusive talk with Zee Business’s Ekta said slippages that lead to NPAs is a normal thing but it depends on the total book of the bank and must not cross the limit. He also added, the past 30 years of NPAs were uncommon and their days have come to an end.

Q: In the recent past you expressed your views about the pros and cons of the merger. Looking at the current scenario of the Public Sector Banks (PSBs), I would like to know about the other options, besides merger?

In case of PSBs, the first step will be to pull them out of the PCA framework by improving them their financial conditions. In fact, we created a strategy for the same during our Gurugram meet. The merger can also be a possibility. There is a talk of differentiated banking under which every bank will have to create their own niche instead of copying each other. It can also be a good strategy. So, we can work on both strategies together.

You stated that the days of bad loans are over but still do you anticipate the slippage of bad loans in coming quarters?

Slippage is a normal thing. But the situation of previous 30 years was not a common thing. I think the days of those uncommon days have come to an end. Being into the lending business, possibilities of slippages in form of NPAs are common but it will depend on the percentage of the total book. If it is within the tolerance limits then there is no reason to be worried but it must not go beyond that. Following the recognition of NPAs by banks in 2017, I feel that all slippages that will occur in the system are going to be that may occur on the normal course of business.

But banks are weighed down by telecom and power sector. So can you say about the kind of process that will be used by the lenders to fight with it?

When it comes to NPAs associated with telecom sector then they have been declared as NPAs and the resolution process of those NPAs have been initiated either under NCLT or outside it. Remaining telecom centres have been consolidated into big players.

Interestingly, we don’t see any danger in the exposure of those three companies that have emerged in the telecom sector through consolidation because their promoters and business models are strong and they also have an almost equal market share.

Similarly, in case of the power sector, almost all accounts have been converted into NPAs in past two quarters, i.e. in December 2017 and March 2018. Remaining power assets with good PPAs, fuel supply and a scenario of power creation will be resolved outside NCLT. Let’s wait and see what we achieve by doing so.

What is your assessment related to current recovery and credit growth? Are we on the road to recovery?

I feel that we are moving towards recovery. Most of the accounts mentioned in the NCLT resolution list has been completed and remaining accounts are likely to be closed in July-September quarter. The first NCLT resolution list had 12 accounts. Resolution of 29 accounts, which were mentioned in the second NCLT list, will also be completed by end of the year. This means the asset resolution of banks will be more and there will be less addition of NPAs. In fact, in March 2019, both gross NPA and net NPA in case of State Bank of India (definitely) and other banks will be less.

The recent bank frauds have raised questions on integrity and working system of the banks. How do you see this issue?

My view on the issue is that the commercial judgements should be seen in the light of the circumstances and context under which the judgement was made. They were bonafide judgements and there could be further actions, which may occur due to negligence and negligence does not mean criminality. You can’t associate everything with criminality, as criminality means the decisions were taken with a bad intention. I feel the bonafide decisions, which were taken without any intention to harm the bank must not be termed as a criminal activity. As such actions will not allow the banker to take right and fearless decisions, which will have a negative impact on the country’s economy as well as its banking system.